EARNINGS:
COST (71/29) announces earnings this week, along with THO (89/66), PEP (32/21), and LEN (26/35).
Pictured here is a directionally neutral iron condor camped out around the 14 delta strikes for the shorties paying 1.04 (.52 at 50 max) with break evens at 253.96/316.04, which are slightly wide of one standard deviation. The correspondent short strangle at 215/315 pays 3.74, although you can certainly tighten that up to get a surgical 2x expected move setup at the 260/310, which is paying 5.15.
They're scheduled to announce on Thursday, October 3rd after market close, so look to put on a play in the waning hours of the New York session on Thursday.
Although THO has more ideal volatility metrics, you'll face problems there with 5-wides in the November cycle, and PEP metrics are too low for my tastes to bother with, with 30-day background at 21.
EXCHANGE-TRADED FUNDS
GDX (74/34)
SLV (73/27)
GDXJ (70/38)
GLD (61/15)
TLT (58/15)
XOP (44/41)
I don't know if there's every been a longer period of time in which precious metals have been at the top of the premium stack for such an extended period of time.
GDXJ has the most ideal metrics, with rank >50%, and implied >35%: the November 15th 34/43 delta neutral short strange with the short strikes at the 20 delta's paying 1.22 at the mid.
If you're tired of playing gold, consider a play in XOP: the November 15th 22/23* almost a short straddle short strangle, is paying 2.08.
* -- XOP finished Friday's trading session at 22.51, which is why I'd split the straddle a tad here in the absence of a directional assumption.
BROAD MARKET
Last week saw a bump in volatility, but it still isn't great short to medium term to sell premium in broad market exchange-traded funds.
Running the 10% short straddle test on the highest implied volatility broad market exchange-traded fund -- IWM, shows that you'd have to go all the way out to February (145 days 'til expiration) to get the at-the-money short straddle to pay greater than 10% of the value of the stock; the IWM February 21st 151 short straddle is paying 15.11 versus Friday's closing price of 151.16. Not everyone likes to go out that far out in time, since it takes longer for those types of plays to come in, but would consider something in that cycle if I don't want to play earnings, I have substantial buying power sitting idle, or I'm inclined to a slower, less attention-intensive type of trading.
The IWM February 21st 1 x 2 ratio'd 130/174 short strangle is paying 3.03/1.51 at 50% max, with 1x contracts at the 15 delta on the put side, 2x contracts at the 7 delta on the call side to accommodate skew, with the February 21st 120/130/2x172/2x175 "double double" paying 1.74. Setting up a double double in that expiry is a bit pesky at the moment, since the put side is limited to 5-wides.
FUTURES
/ZF (75/4)
/SI (73/25)
/6B (61/11)
/GC (61/14)
/UB (58/5)
/ZB (58/10)
/ZS (51/22)
/ZN (44/5)
/CL (37/40)
Friskiness in precious metals (/SI, /GC), friskiness in treasuries (/ZF, /UB, /ZB, /ZN), with some volatility left in beans (/ZS) and oil (/CL).
10% Short Straddle Tests:
/SI January 28th 17.5 short straddle: 1.93 versus 17.59.
/CL December 16th 56 short straddle: 7.10 versus 56.18.
I've got /CL setups on in both the November and December cycles, but this implies that it may not be worth initiating premium selling in /CL in the November cycle.
Honorable Mention: /NG (25/44). I pulled the trigger on a UNG play at seasonal lows, after which /NG popped temporarily. It has receded back from mid-September highs around 2.70 and closed Friday around 2.40. Ideally, I'd want in at 2016 lows (<1.75), but that may be asking for a bit much ... .
VIX/VIX DERIVATIVES
VIX ended the week above 17. While an exciting development for short volatility traders, I would keep my pistol in my holster for the time being, waiting for VIX pops to greater than 20 to start legging into bearish assumption positions in either the VIX itself or derivative products like VXX or UVXY.
COST (71/29) announces earnings this week, along with THO (89/66), PEP (32/21), and LEN (26/35).
Pictured here is a directionally neutral iron condor camped out around the 14 delta strikes for the shorties paying 1.04 (.52 at 50 max) with break evens at 253.96/316.04, which are slightly wide of one standard deviation. The correspondent short strangle at 215/315 pays 3.74, although you can certainly tighten that up to get a surgical 2x expected move setup at the 260/310, which is paying 5.15.
They're scheduled to announce on Thursday, October 3rd after market close, so look to put on a play in the waning hours of the New York session on Thursday.
Although THO has more ideal volatility metrics, you'll face problems there with 5-wides in the November cycle, and PEP metrics are too low for my tastes to bother with, with 30-day background at 21.
EXCHANGE-TRADED FUNDS
GDX (74/34)
SLV (73/27)
GDXJ (70/38)
GLD (61/15)
TLT (58/15)
XOP (44/41)
I don't know if there's every been a longer period of time in which precious metals have been at the top of the premium stack for such an extended period of time.
GDXJ has the most ideal metrics, with rank >50%, and implied >35%: the November 15th 34/43 delta neutral short strange with the short strikes at the 20 delta's paying 1.22 at the mid.
If you're tired of playing gold, consider a play in XOP: the November 15th 22/23* almost a short straddle short strangle, is paying 2.08.
* -- XOP finished Friday's trading session at 22.51, which is why I'd split the straddle a tad here in the absence of a directional assumption.
BROAD MARKET
Last week saw a bump in volatility, but it still isn't great short to medium term to sell premium in broad market exchange-traded funds.
Running the 10% short straddle test on the highest implied volatility broad market exchange-traded fund -- IWM, shows that you'd have to go all the way out to February (145 days 'til expiration) to get the at-the-money short straddle to pay greater than 10% of the value of the stock; the IWM February 21st 151 short straddle is paying 15.11 versus Friday's closing price of 151.16. Not everyone likes to go out that far out in time, since it takes longer for those types of plays to come in, but would consider something in that cycle if I don't want to play earnings, I have substantial buying power sitting idle, or I'm inclined to a slower, less attention-intensive type of trading.
The IWM February 21st 1 x 2 ratio'd 130/174 short strangle is paying 3.03/1.51 at 50% max, with 1x contracts at the 15 delta on the put side, 2x contracts at the 7 delta on the call side to accommodate skew, with the February 21st 120/130/2x172/2x175 "double double" paying 1.74. Setting up a double double in that expiry is a bit pesky at the moment, since the put side is limited to 5-wides.
FUTURES
/ZF (75/4)
/SI (73/25)
/6B (61/11)
/GC (61/14)
/UB (58/5)
/ZB (58/10)
/ZS (51/22)
/ZN (44/5)
/CL (37/40)
Friskiness in precious metals (/SI, /GC), friskiness in treasuries (/ZF, /UB, /ZB, /ZN), with some volatility left in beans (/ZS) and oil (/CL).
10% Short Straddle Tests:
/SI January 28th 17.5 short straddle: 1.93 versus 17.59.
/CL December 16th 56 short straddle: 7.10 versus 56.18.
I've got /CL setups on in both the November and December cycles, but this implies that it may not be worth initiating premium selling in /CL in the November cycle.
Honorable Mention: /NG (25/44). I pulled the trigger on a UNG play at seasonal lows, after which /NG popped temporarily. It has receded back from mid-September highs around 2.70 and closed Friday around 2.40. Ideally, I'd want in at 2016 lows (<1.75), but that may be asking for a bit much ... .
VIX/VIX DERIVATIVES
VIX ended the week above 17. While an exciting development for short volatility traders, I would keep my pistol in my holster for the time being, waiting for VIX pops to greater than 20 to start legging into bearish assumption positions in either the VIX itself or derivative products like VXX or UVXY.